Oil may rise over fears of strains on US-Saudi alliance | Fin24
  • Credit Rating

    'I think Moody's will be happy' - President Ramaphosa says plan to deal with Eskom's debt is imminent.

  • 'No Basis in Fact'

    The PIC commission has slammed Iqbal Survé’s claims about Minister Pravin Gordhan.

  • Fin24’s newsletter

    Sign up to receive Fin24's top news in your inbox every morning.


Oil may rise over fears of strains on US-Saudi alliance

Oct 22 2018 05:45
Mohammed Aly Sergie, Bloomberg

Oil may rise on speculation Saudi Arabia’s admission that a columnist was killed in the country’s consulate in Istanbul will strain the kingdom’s ties with the US.

Saudi Arabia, the world’s biggest oil exporter, said on Saturday that Jamal Khashoggi, a critic of Crown Prince Mohammed bin Salman, died after an altercation in Turkey. The explanation was questioned by many politicians in the U.S. and leaders in Europe. Oil rose Friday for the first time in three days after US President Donald Trump promised “very severe” consequences if Khashoggi turned out to be dead.

“The issue for oil is if the Saudi explanation satisfies the US president and Congress which it evidently doesn’t do completely yet,” Edward Bell, commodities analyst at Emirates NBD Bank PJSC, said Sunday. “It does raise questions about the integrity of the US-Saudi relationship. The market will have a hard time answering those questions and an upward move in oil could come about.”

West Texas Intermediate for November delivery rose 0.7% on Friday to $69.12 a barrel on the New York Mercantile Exchange. Brent for December settlement climbed 0.6% to $79.78 a barrel on the London-based ICE Futures Europe exchange.

Trump said the Saudi statement over the weekend was “a great first step. I think we’re getting close to solving a very big problem.” Later, speaking to reporters in Nevada, he said it was a concern that Khashoggi’s body is missing but reiterated that the writer’s killing shouldn’t affect broader ties with the kingdom.

Brent has retreated nearly 10% from a four-year high on October 3 on signs of expanding American stockpiles and concern that high prices will hurt demand. Hedge funds cut bets on rising West Texas Intermediate crude prices for a sixth straight week, to the lowest since October 2017.

Last week, Saudi Arabia threatened to use its economic clout to retaliate against any punitive measures. While it didn’t make an explicit reference to oil, analysts and traders said it could be read as a veiled threat to use its energy riches as a political tool.

A graph showing the oil price

Saudi Arabia is “unlikely to withhold supply deliberately at this time,” Barclays Capital analyst Michael Cohen said in a report on Friday. Cutting output would hurt the valuation of the planned initial public offering of state-run Saudi Aramco and “it would damage a reputation as a reliable oil supplier that Saudi Arabia has long sought to burnish,” he said.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

jamal khashoggi  |  us  |  saudi arabia  |  petrol price  |  oil


Company Snapshot


Struggling power utility Eskom will take centre stage at this year's mini budget

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote